Opponents of a Maryland bill that would raise investment advice standards for the state's brokers and insurance agents told lawmakers Wednesday to wait for the Securities and Exchange Commission to go first on advice reform.
But a supporter praised Maryland for stepping in where he said the SEC would fail.
The Maryland House Economic Matters Committee and the Senate Finance Committee held hearings on bills that would impose a fiduciary duty on brokers and insurance sales professionals, requiring them to act in their clients' best interest without regard to their own financial gain.
Waves of witnesses gave short testimony before Maryland legislators, with most of the discussion focusing on the fiduciary provision — even though it comprises less than a full page of the 50-page legislation designed to protect financial consumers.
Most of the people participating in the hearings urged Maryland lawmakers to put the brakes on, and warned state action could be preempted by a federal rule.
"We're just asking you to wait until the SEC concludes its work," Mark Quinn, director of regulatory affairs at Cetera Financial Group, told House lawmakers.
Lisa Bleier, managing director and associate general counsel at the Securities Industry and Financial Markets Association, tried to assure lawmakers that the centerpiece of the SEC's proposal, Regulation Best Interest, would require brokers to disclose and mitigate conflicts of interest.
"Mere disclosure is not enough under the proposed Regulation Best Interest," Ms. Bleier said at the House hearing.
But Knut Rostad, president of the Institute for the Fiduciary Standard, praised the Maryland bill, saying it would provide better investor protection than the SEC proposal.
"The SEC is virtually certain to fall short of a true fiduciary standard," Mr. Rostad said in his House testimony. He added in prepared remarks: "Maryland has a unique opportunity to lead the nation towards a real fiduciary standard."
But Dale Brown, president and chief executive of the Financial Services Institute, compared the Maryland bill unfavorably with the now-defunct Labor Department fiduciary rule, which would have applied to brokers working with clients in retirement accounts. Financial industry critics said the DOL rule would have substantially raised costs for brokers.
Mr. Brown asserted the Maryland bill would do the same thing.
"This would make it prohibitive for our small-business owners to continue serving Maryland investors," Mr. Brown said at the House hearing.
Bryson Popham, a lobbyist for the National Association of Insurance and Financial Advisors in Maryland, is hopeful the fiduciary duty provision will be scrapped, as it was last year after industry opposition.
"I think there will be legislators who will be troubled by the broad scope of this grant of authority and the creation of this new legal duty — the fiduciary duty," Mr. Popham, counsel at Frank & Bolton, said in an interview.
The next step for the Maryland bills is a vote in the House and Senate committees. It's not clear when that will occur, according to an aide to the author of the Senate bill, Sen. James Rosapepe, D-College Park.